The dollar index (DXY00) Wednesday finished up by +0.27% and posted a 2-week high. The dollar found support Wednesday on weakness in the Chinese yuan after Reuters reported that Chinese policymakers are considering allowing the yuan to depreciate, abandoning its stable-currency policy to compensate for any impact from US tariffs. Also, weakness in the yen boosted the dollar as the yen fell to a 2-week low Wednesday on a Bloomberg report that said the BOJ is in no hurry to raise interest rates.
The dollar fell back from its best levels Wednesday after the US Nov CPI report came in right on expectations, bolstering the outlook for the FOMC to cut interest rates by 25 bp at next week’s meeting. The chances for a 25 bp Fed rate cut rose to 95% from 86% after the release of the Nov CPI report. Also, strength in stocks Wednesday curbed liquidity demand for the dollar.
